Logistics cover every step in planning the movement of goods, from sourcing them from the supplier to delivering them to the final customer. Comprehensive supply chain management is easier today than ever before thanks to the combination of software and digital tools for tracking each unit moving through your logistics system.
Yet you still need to record essential metrics like fill rate to determine how well you’re achieving your goals. Learn to measure and optimize fill rate no matter your ecommerce business with this simple guide to inventory management.
What Is Fill Rate?
The fill rate of any particular business helps demonstrate the connection between inbound and outbound logistics. On a basic level, it refers to the percentage of customer orders that become immediately fulfilled by available stock that’s already on hand. This means the same metric can show that your inbound logistics are aligned to demand while your outbound efforts are timely and will contribute to high customer satisfaction rates.
There are three main types of fill rate metrics:
- Order Fill Rate: General order fill rates refer to the number of successfully filled orders out of all customer orders placed. If your company has 100 orders and you’ve shipped out the products for 65 orders, you have an order fill rate of 65%.
- Line Fill Rate: Order bills contain individual line items, also known as order lines. The line fill rate tracks how many of these order lines have been filled out of the total number of lines in the bill. If a bill has 10 order lines in total and 9 have been filled, the order has a 90% fill rate.
- Unit Fill Rate: This measures efficiency over time by calculating the percentage of units shipped within 24 hours of order receipt and from stock. Every item shipped from stock within that time frame is divided by the total number of units shipped. That results in a metric showing how quickly orders are fulfilled and how well you’re matching demand rather than dealing with backorders.
How To Calculate Fill Rate
No matter which of the three types of fill rate you want to calculate, the process is largely the same. You simply create a percentage by taking the fraction of successful orders over all orders and multiplying it by 100.
Fill Rate = (Total Orders Shipped / Total Orders Placed) x 100
For the line fill rate, you simply find the fraction of filled line items over all lines in an order bill. Then take that fraction and multiply it by 100 to get the percentage. Again, the unit fill rate is as simple as dividing all items shipped from stock within 24 hours by all units fulfilled, then multiplying it by 100. Basic calculators can help you calculate fill rates by hand, but spreadsheets and logistics software automate the process each time you update your stock and order information.
Why Is Fill Rate Important in Logistics?
Fill rate is a valuable metric because it tells you a few things at once, no matter which way you’re calculating it.
First, it gives you a quick snapshot of customer satisfaction. Customers want their products quickly, and units that leave your warehouse within 24 hours of the order receipt are likely to arrive faster than those that take longer to fulfill.
Second, it’s one of the easiest indicators of inventory management efficiency to calculate on a regular basis. You can track how well you’re keeping items in stock and tailoring to customer demand, adjusting your operations as needed.
Third, there are clear links between the various fill rates and your overall supply chain performance. A sudden drop in any fill rate indicates that you’re not keeping the right products in stock and may need to adjust your logistics approach.
Factors That Affect Fill Rate
Of course, only some factors that affect these fill rate metrics are within your control as the business owner. Some of them are hard to predict or control, and you must address them with agile changes when necessary instead. Identifying which factors are lowering your fill rates is an essential step in addressing the problem. You’re likely to deal with a combination of the following factors at any given time, with some pressures coming and going as customer trends change.
Inventory Shortages
Fill rates generally drop because you’re not keeping sufficient stock on hand to match customer demand. Inventory shortages can arise from a number of other issues, such as supplier reliability issues or inefficient warehouse operations.
Demand Forecasting Inaccuracy
One of the hardest steps in any logistics workflow for ecommerce is predicting how customer demand will ebb and flow. Switching to a more accurate model for forecasting can help improve your fill rate by improving stocking right before there’s a boom in demand for specific products.
Supplier Reliability Issues
No amount of accurate forecasting can overcome issues on the inbound side of logistics. If your supplier isn’t reliable enough, you’ll end up having to tell your customers that you’re out of stock. Backorder issues may extend beyond just the occasional dip in stock as well, leaving you struggling to keep your customers happy. Building reliable relationships is key to maintaining a strong fill rate.
Inefficient Warehouse Operations
Unit fill rate in particular can suffer greatly when your warehouses lack optimization and in-depth tracking software. Having items in stock doesn’t help if your fulfillment team can’t locate them quickly and efficiently to complete the shipping process. Taking the time to optimize even one step in your warehouse logistics could go a long way in boosting your fill rates.
Strategies to Improve Fill Rate
Implement these steps and adjust as needed:
- Commit to effective inventory management practices like real-time inventory tracking, routine audits, and dynamic reorder points.
- Leverage technology and automation across your inventory management system, including automated discounts to increase demand for slow-moving stock.
- Enhance your relationships with suppliers and lower barriers to communication by using interconnected systems whenever possible.
- Perform regular analysis and track your efforts to achieve continuous fill rate improvement.
How AMS Fulfillment Can Help
Fill rates help you track how many units of product were successfully shipped to your customers, sometimes even within a specific window of time.
If you’re struggling to optimize your supply chain and improve your inventory fill rates across the board, partner with AMS Fulfillment for expert logistics support. Our order management services simplify the process of keeping your customers happy while also helping you improve your relationships with your suppliers.
Reach out to us today to tackle fill rate issues with the help of the AMS Fulfillment team.
